How much should you have in savings? Here’s some guidance.

Written by: Lindsay VanSomeren
• Updated •5 min read
Young man sitting on sofa with a notepad, calculating how much he should have in savingsImage: Young man sitting on sofa with a notepad, calculating how much he should have in savings

In a Nutshell

Not sure how much you should have in savings? For most people, the goal should be to have three kinds of savings accounts: everyday savings, emergency fund and retirement. But how much you should save in each varies depending on your financial situation and goals.
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Americans aren’t saving nearly enough for everyday expenses, emergencies and retirement — and that was before the pandemic hit.

Finding money in your budget to save can be a challenge, especially if you’re facing high costs for education, housing or medical care. But it is still possible to get ahead.

Just like any other challenging journey, it’s good to have a goal in mind as a target you can work toward. You won’t get there overnight, but every step will get you closer. Here’s how to calculate how much you should have in your savings accounts.

Why do I need to have savings?

There are many reasons to build your savings, but security is at the heart of all of them.

Everyday savings can help ensure you have the money to afford larger expenses than you could easily pay for using just your monthly income. An emergency fund can help preserve your financial well-being when you’re faced with an unexpected financial crisis. You build retirement savings to help ensure you’ll be financially secure when you retire and are no longer earning an income.

And all types of savings can help you avoid debt by allowing you to use cash reserves, rather than credit cards or loans, to pay for needs and wants.

Having savings can help you feel — and be — more financially secure.

Why can’t I just keep all my money in a checking account?

A checking account is a bank account where you keep money to help you pay for day-to-day expenses like groceries, to pay bills such as rent or a mortgage, and to withdraw cash. Most traditional checking accounts don’t pay interest, so keeping all your money in a checking account won’t help it grow. Savings accounts do pay interest, although the annual percentage yield on traditional accounts can be very low.

And having all your money in a single account may mean you risk spending money you meant to keep in reserve, since it’s very easy to take money out of a checking account with a debit or ATM card or by writing checks. Certain types of withdrawals from savings accounts are typically limited to six per month.

How much should I have in savings?

While there are rules of thumb on how much to keep in your everyday savings, everyone’s situation is unique, so it’s best to do the math for your own situation. Your savings goals and everyday expenses can guide your calculations.

Your everyday savings should be where you store money that you’re saving for a purpose, like a vacation, wedding or car down payment. It can also be where you store money for non-emergency expenses that you can plan ahead for. For example, if you know your car is going to need new tires soon, you can start saving money ahead of time and then you can cover that expense from your everyday savings.

Your everyday savings can also be a way to grow your money — yet still keep it accessible — if you store it in a high-yield savings account. You can even have more than one savings account — for example, one where you save for longer-term goals like a car or home down payment, another for short-term goals like a vacation or big-ticket purchase, and another for annual home maintenance costs.

Keep in mind that if you’ve already built a good emergency fund, your everyday savings account probably doesn’t need to be huge. If you’ve got a lot of money sitting in a savings account, consider whether it’s time to move some funds into financial vehicles that will give you a bigger return, such as a certificate of deposit, money market account or investment account.

How much should I have in an emergency fund?

The general rule of thumb is to keep at least three to six months’ worth of living expenses in your emergency fund. But depending on your personal situation — for example, if you know it will take longer to get re-employed if you lose your job — you may choose to keep more in yours. It could make sense to keep your emergency fund in a separate account from your everyday savings, but make sure it’s one you can access easily and quickly if an emergency occurs. A traditional savings account is a good option, but you may also consider a high-yield savings account or a money market account, which generally pay higher interest rates.

How much should I have in retirement savings?

Knowing how much to save for retirement is one of the trickiest savings goals to calculate. Your ultimate goal is to have enough money saved so that you can meet all your needs and live as you wish when you retire, without having to worry about running out of money. The retirement savings amount that will allow you to do that can be difficult to pin down, but there are some general rules that might be helpful.

Many financial experts recommend putting 10% to 15% of your annual income into retirement savings accounts such as IRAs or a 401(k). That may sound like a lot, but keep in mind that if your employer also contributes to a retirement account for you, that contribution counts toward your total percentage. For example, if your goal is to put 10% of your annual salary into your retirement savings, and your employer has a 401(k) match of 6%, you only need to divert 4% into your savings.

Of course, that percentage can vary based on your current financial situation and the lifestyle you plan to have in retirement.

A financial advisor may be able to help you crunch all the numbers based on your situation and your timeline to give you a good retirement savings goal to shoot for, along with a monthly savings plan to get there. You can also use Credit Karma’s retirement calculator to help get an idea of this for yourself.

Next steps: How can I grow my savings?

When you calculate how much you’ll need to save to reach your financial goals, it can seem overwhelming at first. But remember, you don’t need to get there overnight. Even if you’re not able to save enough to even be on track to meet your goals, saving whatever you can now will help.

Automating your savings can help make it easier to save. You can set up a monthly automatic transfer from your checking into your savings. You may also be able to set up direct deposit to have your employer deposit a portion of your salary into a savings account or a retirement fund.

It’s also important to consider where you put your savings. Retirement accounts will earn the most amount of money when you invest it wisely, but it’s probably best to keep your emergency fund and your everyday savings in two separate bank accounts. And choosing a high-yield savings account can help your money grow even faster.

Calculate your savings

Use our savings calculator to find out how much you may be able to grow your savings and how long it could take.

About the author: Lindsay VanSomeren is a freelance writer living in Kirkland, Washington. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee. She writes for websites such a… Read more.